- The US Fed kept the interest rates at 3.5%-3.75% after the recent FOMC meeting.
- Four Fed Governors expressed dissent from the FOMC decision.
- Kevin Warsh expected the central bank’s latest move.
- Jerome Powell’s chairmanship will end in May, but he will maintain a seat at the Board of Governors.
Jerome Powell, Chair of the US Federal Reserve, has delivered his final speech from his current role. He explained why the Federal Open Market Committee (FOMC) has decided to keep the target range for the federal funds rate at 3.5%-3.75%.
Meanwhile, the official revealed he is not retiring yet and will instead serve on the central bank’s Board of Governors after stepping down as chair.
Interest Rates Remain at 3.5%-3.75%
The Fed kept the interest rates at the current level due to the economy’s expansion “at a solid pace.” The FOMC factored in the almost unchanged unemployment rate over the past few months, showing only little job gains. Inflation has also remained elevated, primarily due to rising energy costs.
Additionally, the central bank highlighted that it must time rate adjustments appropriately amid prevailing conditions to balance the risks of its dual mandate. Ideally, the Fed seeks to achieve maximum employment while maintaining inflation at a 2% rate in the long run. Nonetheless, it assured that it will exercise vigilance over emerging risks.
However, the Fed’s decision came with four dissenting opinions, the highest ratio of opposition since 1992. Governor Stephen Miran insisted on a quarter percentage cut, while the other three voted for a hold but “did not support inclusion of an easing bias.”
Bitcoin (BTC) notably fell sharply from a near $78K intraday high to $75K leading to the Fed announcement. Ethereum (ETH) followed a similar trajectory, falling from $2.3K to $2.2K over the same period.
Kevin Warsh’s Thoughts
Kevin Warsh, Powell’s expected successor, believes the market has already priced the latest FOMC decision. Despite earlier advocating for lower interest rates, he refused to comment on the Fed’s recent direction.
Many believe Trump will strongly influence Warsh in lowering rates. But then again, others say the rising inflation will likely prevent him from making such drastic moves.
Despite speculations, the Trump nominee emphasized in interviews that he will remain apolitical and that Trump has “never once” asked him to commit to any particular interest rate.
Jerome Powell to Stay in Fed
Powell said there has been a change of plan. Instead of retiring in mid-May this year, he will take a seat at the Fed’s Board of Governors.
The outgoing Fed chair explained that Trump’s legal attacks have left him with no choice but to take on the role. He claimed the central bank’s integrity is under attack by none other than the president.
Powell called the president’s legal assault “unprecedented” and “illegal.” So, he is determined to sit on the Fed board at least until the lawsuits are over.
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